Community Measurement – ROI
February 23 2010 by Jason Peck ~ 13 CommentsThis is part 9 of a 9 part series on what to measure and how to determine the ROI of your community website.
This is the final piece of this series. We last left off on some other things to measure that might not fall into any one category or just hadn’t been covered here yet.
I’ll do a recap of the entire series in another post, but for this final piece, I want to focus on the good stuff. ROI.
ROI is return on investment. At the end of the day most business exists to make money, and what they get out of a given initiative or program must be greater than what they put into it.
It may not be easy to calculate ROI from community/social media initiatives, but it can be done.
Establish Goals
The first step is establishing goals. What is it that you want to get out of your community? Here are some examples:
- Generate new ideas/feedback
- Acquire more customers
- Generate more leads
- Increase sales
- save money and time (customer service, focus groups, acquisition costs)
- Keep customers around longer
- Drive customers to purchase more often
Establish some real goals and metrics, such as increasing sales from community members 5%. Assign a value to non-sales items, such as new ideas or feedback on products.
Decide What’s Important
We’ve given you a variety of things to measure throughout this series. Take what is important to you and your goals and measure what matters. If your only goal is to increase sales, then you might not care about measuring the number of comments on message board posts..unless you’re seeing that there is some kind of relationship with sales.
Measuring Community ROI
After you’ve established goals and what is important to measure, you need to measure and keep track of things. There are a few different ways to measure the ROI of your community website. You can either take a direct or indirect approach, or some combination of the two.
Direct Approach
Here’s a quick refresher on ROI.
ROI = (total benefit minus total costs) divided by total costs.
Total benefits include the dollar value for things that you’re measuring (sales from community members, money saved, value of ideas, etc). Total costs include things like setup/design of the community, employee costs, hosting/ongoing costs, etc.
Measuring community ROI like this is a great way to tell what you’re getting out of your community vs. what you’re putting into it. However, it requires looking at your community as an isolated program.
Indirect Approach
An online community doesn’t exist in a vacuum, and it can be tough to say with 100% certainty that you’re achieving or not achieving your goals just based on the community alone. There are a lot of other factors that come into play, such as:
- new product releases
- other promotions or advertising
- coverage in press
- quality of sales force
- changes to main website
- competitive pressures
These are just a few factors. Olivier Blanchard (aka TheBrandBuilder) has put together some great thoughts on taking a long-term view and comparing community/social media activity and non-financial measures to overall trends and financial impact. Definitely check out his full presentation, but here are the main points:
- Establish a baseline (ex: year-over-year growth, monthly growth) before social media vs. after
- Create activity timelines – keep track of all important marketing efforts (when you do a press release, go to a conference, release a video, blog post, whitepaper, etc)
- Look at sales revenue (# of new customers, total customers, revenue per customer, etc)
- Measure transactional precursors (brand mentions, website traffic, etc)
- Overlay timelines/activities
- Look for patterns
- Prove relationships
This take on community measurement and ROI is nice in that it takes an overall view of how community and social media affect business. The challenge is measuring everything and analyzing efforts. Tough, yes, but not impossible.
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I hope this gives you some ideas for measuring the ROI of your own community website and efforts. You may want to take a combination of these two approaches to isolate some things and look at the overall picture for others. You should at least be able to measure your efforts online better than offline, because just about everything is trackable. Measure what is important and see what is working and not working and adjust accordingly.
I’d love to hear your views on community/social media ROI and how your company is approaching this. Thanks!
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